A new KPMG report showed that autonomous vehicle technology will have a tremendous impact on this sector.
The car insurance market will wither by up to 60 percent by the year 2040 and by 70 percent of its current size by 2050, according to a recent KPMG study.
Autonomous vehicle technology will drive the decreasing size of the marketplace, said the report.
According to the KPMG research, the reason the car insurance market will fall by about $137 billion by 2050 is because of driverless vehicle tech and ride-share transportation. With on-demand services and autonomous vehicles, the liability will shift away from individual drivers and toward automakers.
This recent auto insurance report was an updated version of a previous 2040 forecast it issued. The firm said it brought its actuarial model out to 2050 and determined that the rate with which the change was occurring sped up. This drove forecasts that project heavier insurance sector shrinking than the KPMG’s previous study which was published in 2015.
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The car insurance market study also reveals that new forms of coverage product will be required.
The updated research report, titled “The Chaotic Middle: The Autonomous Vehicle and Disruption in Automobile Insurance,” revealed a rising need for new insurance coverage products. The report authors stated that traditional auto insurance is at risk of obsolescence as motorists look to automakers to overcome driving risk instead of needing extra insurance coverage.
KPMG Actuarial and Insurance Risk practice principal, Chris Nyce, explained that by establishing the most recent observations as a component of the actuarial model underscores the “long-term decline in the number of auto accidents overall, and the share of accident claims funded by personal auto policies will also contract.”
Moreover, the firm also predicts that by 2050, the auto insurance sector will see a 90 percent decrease in loss frequency. This, in combination with a reduction in severity and the impact of ridesharing programs will produce the $137 billion losses drop, said the report. Personal lines auto insurance companies will experience the greatest reductions as, by the end of this prediction period, only 22 percent of auto loss will be from that car insurance market category.